Moody's revises ratings of three NBFCs

Moody’s Investors Services initiated action to revise creditworthiness of three local non-banking finance companies citing economic disruptions amid an outbreak of COVID19.

While It placed Hero FinCorp and India Infoline Finance under reviews for downgrades, the global rating company changed outlook for Muthoot Finance to ‘negative’ from ‘stable’.

“The Indian NBFC industry has been affected given disruptions to India's economic activity from the coronavirus outbreak, which will weaken these companies' credit profiles,” Moody’s said in a release Monday.

The move reflects the impact on Hero FinCorp, India Infoline Finance and Muthoot of the breadth and severity of the shock, and the deterioration in credit quality it has triggered, the rating company said.

Hero FinCorp's local and foreign currency issuer rating is at Baa3, the lowest rank in the investment grade category in line with India’s sovereign grade. Any downgrade from the current level will push the company’s creditworthiness down to the high-yield category.

“A substantial capital raise that improves the company's loss absorbing buffer can also help stabilize the rating,” Moody’s said.

India Infoline Finance is now rated as Ba3, a category three notches lower than investment grade.

“The outlook could return to stable if the company's solvency and liquidity remain stable over the next few quarters,” the rating company said.

Muthoot Finance, rated two notches below the investment grade, went through a change in outlook.

“Muthoot's ratings could be downgraded if the company's funding and liquidity profile materially deteriorates during the next 12-18 months,” Moody’s said.

Muthoot Finance shares were up by 1.6 percent to close at Rs 747.25 Monday.

Investors shunned IIFL Finance shares with the stock price plunging 4,56 per cent.

Moody's issued the release after local share market had closed the day's trading.